Singapore-listed Frasers Centrepoint is taking a bet on British business parks by acquiring a portfolio of UK properties around London and Glasgow, Scotland for £686 million ($906.2 million). The international property firm is purchasing the 4.9 million square foot (450,766 square metre) business park portfolio from California-based global asset manager Oaktree Capital Management.
Frasers has also entered into a conditional agreement with Oaktree to purchase another corporate park for £57 million ($75.3 million), subject to conditions relating to net operating income yield and the property’s occupancy rate, by mid-2018.
Through the acquisition, marking the latest in a series of major British property deals by Asian investors, the Singaporean developer will benefit from the “resilience and continued growth” of the UK business park market following last year’s Brexit vote, according to a Singapore exchange filing by the company.
Frasers Branches Out into UK Business Parks
“The Acquisition is in line with the Group’s strategy to grow overseas presence and recurring income sources,” commented group CEO Panote Sirivadhanabhakdi in a statement. “The Group has been in the UK and Europe for over 15 years, and we now extend our presence from the residential, hospitality, industrial and logistics sectors to include the commercial and business park sector.”
Wholly-owned subsidiary Frasers Property International Pte Ltd is purchasing each property from a subsidiary of a fund or account managed by Oaktree Capital Management. According to a report in the Estates Gazette, the vendor – a joint venture of Oaktree and Italy’s Patrizia Immobilien – had been considering selling the assets for two years, after spending £688 million to build the portfolio in 2013 and 2014.
Frasers believes the freehold properties offer growth prospects, with rental income underpinned by a diversified base of over 400 tenants including Ericsson, Intel and Novartis. The parks are over 85 percent occupied with a retention rate of around 80 to 85 percent and a weighted average lease expiry of 5.9 years.
The most valuable asset is Winnersh Triangle, a 1.5 million square foot (135,731 square metre) mixed-use business park in Reading, within a 35-minute train ride from central London. The property, which is 90 percent occupied, is changing hands for £365 million ($482.2 million). The portfolio includes two other parks in the London area: Chineham Park in Basingstoke is being sold for £142 million, and Watchmoor Park in Camberley is trading for £42 million.
The largest of the properties is Hillington Park, a 2.3 million square foot (215,628 square metre) mixed-use facility in Glasgow, Scotland that features grade A offices, headquarters buildings, start-up office suites and retail outlets. The project, which is being purchased for £137 million, has around 294 tenants.
Asian Property Players Betting on Britain
Frasers Centrepoint’s UK deal is the latest in a string of British acquisitions by Asian investors and comes despite political uncertainly following the country’s decision to leave the EU last year. Global real estate agency Cushman & Wakefield calculates that investors from Asia Pacific shelled out more than £4 billion ($5.2 billion) for commercial real estate in London in the first half of 2017, nearly half of the city’s deal total and the highest level in five years.
Hong Kong investors have been especially active, racking up over $3.8 billion in London acquisitions this year, including sauce maker Lee Kum Kee Group’s $1.7 billion purchase of 20 Fenchurch Street, known as the Walkie Talkie building, in July. Singapore-based Ho Bee Land also contributed to the capital flows by buying the central London office building 67 Lombard Street for £129 million ($163.2 million) in June.
Frasers has built over 600 homes in Britain since entering the market in 2000 and is developing a number of residential projects in London. The group also scooped up the Malmaison Hotel du Vin group of 29 boutique hotels in the UK for £363.4 million in June 2015.
Following its business park deal, Frasers will hold about S$4.2 billion ($3.1 billion) of assets in the UK and Europe, with commercial properties comprising some 30 percent of the group’s S$26.8 billion ($19.9 billion) of total assets. The company also has investments in the logistics, industrial, commercial and business park sectors in Singapore, Thailand, Australia, Germany, and the Netherlands.